Review of the literature on credit risk modeling : development of the past 10 years

This paper traces the developments of credit risk modeling in the past 10 years. Our work can be divided into two parts: selecting articles and summarizing results. On the one hand, by constructing an ordered logit model on historical Journal of Economic Literature (JEL) codes of articles about credit risk modeling, we sort out articles which are the most related to our topic. The result indicates that the JEL codes have become the standard to classify researches in credit risk modeling. On the other hand, comparing with the classical review Altman and Saunders(1998), we observe some important changes of research methods of credit risk. The main finding is that current focuses on credit risk modeling have moved from static individual-level models to dynamic portfolio models.

Modeling Hospital Readmissions in Dalarna County, Sweden

Unplanned hospital readmissions increase health and medical care costs and indicate lower the lower quality of the healthcare services. Hence, predicting patients at risk to be readmitted is of interest. Using administrative data of patients being treated in the medical centers and hospitals in the Dalarna County, Sweden, during 2008 – 2016 two risk prediction models of hospital readmission are built. The first model relies on the logistic regression (LR) approach, predicts correctly 2,648 out of 3,392 observed readmission in the test dataset, reaching a c-statistics of 0.69. The second model is built using random forests (RF) algorithm; correctly predicts 2,183 readmission (out of 3,366) and 13,198 non-readmission events (out of 18,982). The discriminating ability of the best performing RF model (c-statistic 0.60) is comparable to that of the logistic model. Although the discriminating ability of both LR and RF risk prediction models is relatively modest, still these models are capable to identify patients running high risk of hospital readmission. These patients can then be targeted with specific interventions, in order to prevent the readmission, improve patients’ quality of life and reduce health and medical care costs.